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08 Feb 2021

Sending money overseas? Tips to help you get the best deal

By Damon Frith, content editor for Citi Sending money offshore can be expensive if you don't look at your options

There are many reasons why you may want to send money offshore, perhaps to a family member or in preparation for an investment.

The cost of such transactions used to be costly and opaque, but new technologies and transfer systems have reduced costs, transfer times and made the whole process a lot more transparent. That does not mean you don't have to be on your guard. Which organisation you choose to make a transfer and how that money is received at the other end will make a difference to the cost for both the person transferring funds and the party receiving.

And just because Australia has a modern banking system does not mean one service is almost the same as the next. In 2016 the World Bank found the cost of sending money from Australia was the third highest out of the G20 countries.

In addition, the Australian Competition and Consumer Commission (ACCC) in 2019 released it's findings from research into money transfers, and found in some circumstances consumers could save up to $AU500 on a $US7000 transfer. Both the World Bank1 and the ACCC2 also found the big four banks are often the most expensive avenue for offshore money transfers from Australia.

Where are the 'hidden' costs?

  • The most significant variation in price between suppliers is likely to come from the retail exchange rate on offer, known as the margin fee. You make look up the exchange rate for the Australian dollar to the US dollar and find $AU1.00 is worth US75c, but for an international funds transfer the organisation you have picked may only be offering US74c. The difference on each dollar transferred is the profit the organisation is adding into the transaction, and that margin fee can vary considerably between service providers.
  • That cost may be the only additional charge, so the offer could be advertised as fee-free, which although true may not mean its the best offer available. The old adage "it pays to shop around" works well for currency transfers.
  • Fees can come in various forms. In addition to the 'margin fee' there could be additional costs, including: conversion fees, fees charged by the institution receiving the funds and fees associated with the size and frequency of the transaction.
  • If time is an important factor check with the provider how long it will take for the funds to be received by the recipient. Variations can be as little as minutes to as long as five days.
  • Make sure you take into account all the pros and cons of the service providers you consider to ensure both you and the recipients of the funds are getting the best deal to meet your requirements.

Take advantage of evolving technology

A more recent evolving technology and service is global currency accounts. Offered by banks like Citi, these accounts typically allow people to hold funds in their local currency and transfer it easily into any of a basket of currencies offered.

If you are regularly paying funds in say US dollars, it would allow you to take advantage of exchange rate fluctuations to build your US currency holdings when the dollar moves in your favour.

Alternatively, if you receive funds from family of perhaps an investment like an offshore rental property or share dividends, you may continue to hold those funds in a foreign currency until a favourable currency change allows you to convert the funds at a better rate.

Whichever path you choose for your foreign transactions, make sure your provider has the information available on its website to answer all your questions, or an easy method to ask and have your queries answered.

Discover more about Citi’s Global Currency Account > 

1 World Bank Remittance Prices Worldwide December 2020

2 Foreign Currency Conversion Services Inquiry September 2019

This information is not advice and has been prepared without taking account of the objectives, situations or needs of any particular individuals. Any individual should consider if the information is appropriate for your own situation. Individuals are advised to obtain independent legal, financial, foreign exchange and taxation advice prior to making financial decision. Past performance is not indicative of future performance. Citigroup Pty Limited ABN 88 004 325 080, AFSL and Australian credit licence 238098.